On the Books

Loretta Harrison is a born hustler. "I been making and selling things since I was about 8 years old," says the 45-year-old, unemployed mom. She buys wholesale in Manhattan -- balloons, socks, scarves, you name it -- then loads up a pushcart and sells at retail prices on the streets of Jamaica, Queens. She's peddled Icees off the back of a tricycle, teamed up with her teenage son to hawk bottled water for $1 at stoplights, and organized "passion parties," where she brings together groups of women to gab about sex and buy erotic toys. "I love sales," she gushes. "For me to have something that somebody else wants and for them to go in their pocket and bring out hard-earned money to get what I have is just -- it's like a high to me!"

Harrison can think of only one hustle that didn't work: selling hot dogs. Not that the fundamentals were wrong, she insists. She set up her stand in a gas-station parking lot, across from the bus stop on the large boulevard by her house. For a week, she made good money, selling dogs and buns she bought wholesale at Costco. Problem is, vending licenses of any kind are hard to come by in New York City, and the cops take violations seriously. So they ran her off after just a week. She lost $700 on a hot-dog cart she'd bought out of the classifieds. "It was gonna work," she grouses, still mad 10 years later. "If they'd left me alone, I could have been making my money."

Harrison hasn't worked a traditional, full-time job in nearly 14 years, since her eldest son, Malcolm, had a series of seizures in the second grade that resulted in brain damage. "After that, you know, he was a paranoid schizophrenic," she says. "He'd think he didn't have enough sugar in his cereal, and he'd run away and tell people we were bothering him. Punch out the windows and stuff." So she quit her job delivering mail in the neighborhood to take care of him and her then-newborn daughter. "That whole year, my Ready Teddy bags were the only thing that kept me going."

Ready Teddy is Harrison's pride and joy. It's a crocheted teddy bear?and-tote combo that she's been making since 1992. In the past, she's sold the bags in a Brooklyn craft store for $35 a pop but now moves them herself for $20. "When I had people selling for me, I would charge them $15. They'd sell it for $20 and take out five," she explains, rattling off pricing and staffing schemes that have never been written down, let alone put into a business plan.

In fact, Harrison can't so much as give a ball-park estimate of how much money she's made or lost year to year on all of her little businesses. She figures that between her sales and her wage jobs, her income has probably peaked at $25,000 in a year. "As far as keeping records and whatnot -- Loretta's not so good at keeping records," she jokes. "Especially when you get the money and you end up having to spend the money to live."

Whether and how Harrison can actually live off of her sales schemes are larger questions than she knows -- and ones that may be getting more attention in coming years, as policy-makers grope for solutions to the joblessness that's strangling cities. Every month brings a new low in the downward spiral that Wall Street's follies set in motion. Unemployment was at 10 percent at the end of 2009. More families went hungry in 2008 than at any time on record -- an estimated 17 million households -- and the poverty rate reached higher than it's been in more than a decade.

The conventional debate over how to help families that find themselves counted among those doleful statistics focuses on the social safety net -- do we boost supports like welfare, provide low-skill job training, or just force folks to try harder to find work? The assumption lurking behind all of these answers is that poor people are broken and need to be fixed, or at least propped up. But a rarely noticed industry of small-business advocates and lenders say the problem is the other way around. What we need, they argue, is an economy that values the remarkable entrepreneurial instincts that people like Harrison already have. And their research suggests that with relatively small investments for training and with loans of as little as $500, small, side hustles like Harrison's could get neighborhoods like Jamaica churning with enterprise.

Microenterprise, as it's called, has long been associated with the developing world. The Grameen Foundation's Muhammad Yunus pioneered the idea back in 1976, with a $27 loan to a group of Bangladeshi businesswomen, following a famine. A global industry has since parceled out billions of dollars in microloans, and Yunus has won both a Nobel Peace Prize and a Presidential Medal of Freedom. But while the idea owes its fame to the developing world, it has also been slowly building in America since the mid-1980s -- it's just been ignored by an economic and political culture obsessed with the pursuit of large, rapid growth.

Now, with the U.S. economy in disarray, domestic microenterprise advocates believe this is finally their moment in the sun. International microlenders are slowly turning their attention to the United States -- both Grameen and the celebrated peer-to-peer lending tool Kiva.org have announced new U.S. ventures since the recession began. And after years of hostility from Bush-era Washington, microenterprise development has won the support of both the Obama administration and the Democratic Congress.

"Folks are working really, really hard to catch up with the growing demand that came about because of the downturn," says microenterprise veteran Michelle Levy-Benitez, a consultant for the Corporation for Enterprise Development and former policy director of the trade group Association for Enterprise Opportunity. The effort is thus far relatively tiny: AEO estimates $100 million to $150 million is invested in U.S. microenterprise development annually. But industry researchers argue Harrison is among an estimated 10 million low- to moderate-income people who could turn their ideas and hustles into thriving, job-creating businesses -- and rescue inner-city economies in the process.


The oft-overlooked fact about our current "jobless recovery" is that in working-class black and brown neighborhoods, the 2001 recession never ended. Black unemployment has never dropped back to the 7.6 percent rate of 2001. Construction jobs during the building boom helped bring Hispanic unemployment to historic lows, but it has since shot back up to 13.1 percent. In late 2009, Harrison was among nearly 16 percent of black Americans who were out of work.

Those numbers look even worse when you consider the people who are underemployed, meaning they're working part time despite needing a full-time job. About a quarter of blacks (23.8 percent) and Hispanics (25.1 percent) were underemployed in September 2009, according to the Economic Policy Institute. This also helps explain why a quarter of black America lives below the poverty line.

The black and brown families who were left out of the decade's growth didn't have the option of sitting idly on the dole either, stereotypes notwithstanding. The reality is that from Bill Clinton's welfare revamp to George W. Bush's budget knife, Washington has shredded the social safety net. As a result, public-assistance rolls have shrunk dramatically even as jobless and poverty rates have climbed. Struggling families aren't leaving welfare for living-wage jobs. Rather, they are keeping the lights on and the kids fed in the same way Harrison has -- by piecing together income from every source available, be it part-time, low-wage labor; public assistance; or the black market.

Tasha Stoudymire started working in department-store photo studios in high school, when she took her newborn son for a portrait and ended up applying for a job. Over the span of 11 years, she scraped her way up from $5.15 an hour to $16.70 an hour. "I couldn't stand it," she says of the sacrifice earning that money demanded. "My son said to me, 'Mama, you work more than you stay home. You go to work and you come home and sleep and shower.' That hurt me."

Then in 2008 she endured a rapid, downward spiral. First her mom died, leaving her a 13-year-old niece to raise. At the time, Stoudymire was pregnant with her second child, a girl. Five months after giving birth, she started hemorrhaging and raced to the doctor; she discovered she was pregnant again, with twin girls. The twins were born terribly premature, at 26 weeks. They stayed in the hospital fighting for life until September, way past the end of Stoudymire's 12 weeks of family medical leave. And like anything in retail, Halloween through Christmas is the department store's busy season; in this economy, the store wouldn't hold her spot while she sorted things out. Her household had grown from two to six, and she was out of a job.

Now, at age 30, Stoudymire has a new plan: opening a combination day-care and child-portrait business out of her Queens home. She's already running a photo studio off the books, and she's got a house full of kids anyway. Skills aren't the hard part. She just has to figure out how to make it all work as a proper business.

So when a friend passed her a flier for a child-care business-development class at Business Outreach Center Network, a group that offers training and small loans to mostly immigrant clients, Stoudymire declared it destiny.

"Sometimes they don't think it's a business. They're just -- doing something," explains Rosalinda Martinez, the Queens director of the BOC Network. "So that's where we come in."

America's roughly 6 million small businesses -- defined as firms with fewer than 500 workers -- employ about half the nation's private-sector work force. Another 21.7 million people ran their own businesses without employees in 2006. Politicians of all stripes love to laud these folks. In the American political narrative, small business owners do everything from creating jobs to building communities. And they're the people for whom Congress is still trying to pry open traditional credit markets. As President Barack Obama proclaimed in May, "The entrepreneurial spirit lies at the core of our nation's economy and identity." Microenterprise-development advocates say politicians and bankers shouldn't view people like Stoudymire and Harrison any differently.

To have any hope of succeeding, Stoudymire needs training and capital; right now all she has is the patience to take things one step at a time. "Hey," she says, "this month's a good month. Hallelujah!" Asked about her own bleak financial profile and the broader economic picture, she is optimistic. "I can only attribute it to God," she says of her can-do outlook. "I'm not trying to be super spiritual. But he's the one I talk to when I'm walking up and down, a baby in my hand, saying, 'God, how's this going to work out? This has got to be paid and this has got to be paid and this is due here and -- '" She breaks off and swats her doubts out of the air. "You know, fear is the opposite of faith."

Microenterprise is itself something of a sanguine industry. Its organizing idea is that the solution to poverty is to leverage the existing skills and ambitions of poor people. This notion stands in stark contrast to a core ideology of American economic life -- that rich and poor are earned stations, each indicative of individual purposefulness and indolence.

Microenterprise is defined, officially, as any business with fewer than five employees that takes less than $35,000 to get off the ground. According to the Aspen Institute's Microenterprise Fund for Innovation, Effectiveness, Learning and Dissemination, the vast majority of these ventures are both owned and staffed by an individual or a family. The industry group AEO estimates more than 24 million such businesses exist in the United States.

The idea of building upon tiny, family-run businesses has never caught on in U.S. economic-development circles. But according to Aspen's most recent count, at least 500 organizations around the country either lend money or provide training to people who are trying to use small business to thwart poverty. The field started off providing capital largely to residents in black neighborhoods (particularly to black women) who had been walled off from banks for decades; it has since grown and splintered into both money lending and business training. More than 60 percent of the clients of today's microenterprise-development groups are people of color, according to AEO, and more than two-thirds are women.

The field saw its first boom in the late 1990s, when the Clinton administration built up a handful of federal programs that make financing possible. The U.S. Small Business Administration's Microloan Program, which began as a demonstration project in 1992, took on permanent status in 1997. The following year Congress created the SBA's PRIME program, which funds training and technical assistance for new businesses. The Treasury Department's Community Development Financial Institutions Fund also started pushing money to microenterprise, as did the Community Development Block Grant program, under the Department of Housing and Urban Development. All of this new money spurred an explosion of activity -- more than 40 percent of the microenterprise--development groups that exist today were launched between 1995 and 1999, according to Aspen.

The changes these programs have been able to drive are incremental but nonetheless meaningful. A previous series of small studies by Aspen have shown microenterprise boosts incomes, and Aspen is currently studying how many jobs it has created in low- and moderate-income neighborhoods. In 2008, Aspen surveyed about 1,400 clients served by microenterprise-development groups. Over half of those who were living below the poverty line when they joined the programs had risen above it within a year. Average household income went from just under $30,000 to $36,000.

The Bush White House was never convinced this sort of change did much to build up the oft-touted "ownership society." Bush repeatedly sought to zero out funding for both the PRIME and the Microloan programs. Overall, SBA lost more than a quarter of its funding between 2001 and 2008.

"They didn't see the need for the programs," Levy-Benitez, of the Corporation for Enterprise Development, says bluntly. Microenterprise advocates were able to save the programs but not without deep funding cuts. Foundation money helped fill in gaps, but the rapid growth of the late 1990s stopped -- even as Wall Street's wild ride galloped into high speed. Over the next eight years, the gap between rich and poor yawned ever wider, as nearly 6 million people fell into poverty. The collapse of America's vaunted middle class didn't begin in those years, but it arguably climaxed. And then came the crash.


Neither Stoudymire nor Harrison has been caught off guard by the current recession -- they've been piecing scraps together their whole lives. "And I thank God for those times, because I know how to survive," Stoudymire says, only half joking. The housing-assistance grant she gets from the city doesn't come close to covering rent on the place she moved into just before she lost her job. She'll move when the lease is up, but in the meantime she keeps a multilayered hustle going each month. She's got her underground photography studio. She's tapped into an underappreciated informal credit market, trusting friends for a suite of loans with slow repayment plans. And she stitches the two together with food stamps and child support.

Harrison's finances are a similar patchwork. She just got certified as a medical assistant, but it's a crowded job market. For years, she's combined periodic public assistance and child-support income with her off-the-books sales and a series of part-time jobs -- as a supermarket cashier, a newspaper carrier, a crossing guard. "It's not a whole lot of money," she concedes. "It all adds up, from different sources. And that's how I like to see money come, because I don't like to be dependent on one thing."

Harrison's no more daunted by the recession than Stoudymire. She knows from experience that she'll move the socks and scarves she's picked up from the winter sales season. "Money's always out there; I don't care how tough it is," she insists. "And when it comes to children's things? People always spend money on they children."

The problem is scale. Harrison's informal businesses don't make enough money to support her and her family. And as a whole, microenterprise faces the same challenge. Lenders and trainers haven't yet drummed up enough investment to reach a self-sustaining scale and prove their development worth. The Aspen Institute's studies have found that, with a few exceptions, most microenterprise programs serve fewer than 500 clients a year. Although both lending and training programs appear to be growing, the groups Aspen surveyed for fiscal year 2007 had meager budgets, with mean expenses of just over $400,000. That money came overwhelmingly from donors, meaning the programs are still far from self-sufficient.

The programs have, however, demonstrated a clear ability to help clients build sustainable businesses. In Aspen's 2008 client survey, nearly two-thirds of people who didn't have businesses when they entered a program successfully got one started. Those new businesses split about evenly between full-time and part-time ventures, but the full-time ones generated median revenues of $40,000 in 2007. That's not Wall Street money, but it's enough to move a family out of poverty-wage labor. And the biggest programs show even more potential. ACCION USA is the nation's largest microlender and, according to spokesperson Laura Kozien, "for every microloan that ACCION approves, 2.7 jobs are created in low- to moderate-income neighborhoods."

Obama and the Democratic congressional leadership say they get it, and they're prepared to put more public cash into the effort. The stimulus bill included $30 million in new funding for microlending and boosted the number of PRIME training grants by about 40 percent over 2008. In October, Obama also called for increasing the limit on SBA-backed microloans from $35,000 to $50,000. Of course, all of this is still pennies compared to the hundreds of billions that Congress has handed large banks and Wall Street firms.

One night in the late fall, Stoudymire and a dozen other mothers and grandmothers sat huddled around folding tables in a drafty Brooklyn community center, listening raptly as a BOC Network trainer walked them through the impressive array of expertise they already have. "The word 'just' -- let's eliminate that," the trainer chided one woman, a gray-haired grandmother with a small, informal day care who introduced herself too humbly. "You're not 'just' a child-care provider. You're a child-care provider."

Over the next two hours the women traded hard-won child-rearing and baby-sitting wisdom. How to manage the push and pull of minding your own kids while caring for someone else's at the same time. How to tell a sensitive parent that you're noticing developmental problems in a child. How to keep kids from playing on dangerous bunk beds but also not freak out over every tumble.

Throughout, the trainer nudged the women toward a business owner's mind-set, noting their legal responsibilities, marketing advantages, and money-saving opportunities. "Start looking at things in your house right now that could be used. Take off your adult cap and think as a child. What's a toy?" She put a shoebox face down, propped the lid on its edge like a ramp, and sent a toy car sailing downward. "You don't have to buy this! You've all got on shoes."

Stoudymire and her classmates will go through 22 sessions like this, get free start-up supplies, and qualify to apply for a $1,000 grant. Since 2003, BOC Network has put almost 800 New York City women through this training and given them more than $170,000 in grants. By BOC's tally, the businesses those women later built created more than 275 jobs.

At the previous week's orientation, Stoudymire burst into tears of joy as she listened to the talk about the market advantage of providers who understand kids' developmental challenges and can help navigate city bureaucracy. Who knows these things better than she does, she thought. "You don't know how I struggled, saying, 'How is this gonna work out? How is this gonna work out?' And the more I listened, it was just like God's mouth to my ear, 'Be still. Just be still.' It was confirmation." She had that feeling all innovators get, that conviction that they know something nobody else does. And she embraced an emotion few have found in the recent downturn, declaring, "I'm excited!"

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